Discovery’s share price gained the most in well over five years on Thursday as it said it expects its first-half headline earnings to rise by almost a third after a strong operational showing.
Discovery Bank performed ahead of plan, and Discovery Health delivered strong new business growth.
The group said on Thursday that normalised profit from operations for the six months to end-December is expected to increase by 22%-27% from a year ago.
Headline earnings are expected to increase by between 27% and 32% and normalised headline earnings by between 25% and 30%.
New business annual premium income (API) was up 12% for the reporting period, it said.
Discovery Bank’s normalised profit from operations increased by between R210m and R230m from a loss of R145m in the previous period. The bank performed ahead of plan and there was a further acceleration in the acquisition of clients, averaging about 1,500 customers a day by the end of the reporting period, Discovery said.
“Additionally, all key metrics performed well — the credit loss ratio, increases in non-interest revenue and net interest income — illustrating the consistent quality of customers and their levels of engagement and primacy,“ it said.
Discovery Health delivered strong new business growth, with an improved risk profile expected to benefit the scheme. Earnings growth was solid, as a result of continued scalability and cost efficiency, fully absorbing a once-off administration concession to members of R125m disclosed in December, it said.
Discovery Health grew normalised profit between 3% and 8%, with 16% growth in new business API.
Discovery Life’s operating profit grew strongly, with new business up 16% on an embedded-value basis, including a recovery from group life.
Discovery Invest benefited from strong growth in capital markets and positive net flows. However, the rate of earnings growth was dampened by an in-period asset liability matching loss related to the steep decline in yields. Excluding this, earnings increased 21%, with new business API up 13%.
Discovery Insure grew normalised profit by 32% to 37%, though API was down 2%.
The Vitality composite’s progress reflects the work done to restructure and scale the composite onto one platform based on the Vitality Shared-value model, it said.
VitalityHealth performed ahead of plan, with a substantial increase in operating margin through rigorous pricing and claims actions, as well as effective expense management. New business production was robust despite a challenging economic environment, it said.
VitalityLife performed well and Ping An Life Health Insurance delivered an excellent performance, boosted by exceptional investment returns from equity markets in China, Discovery said.
The group’s first-half HEPS is expected to increase by between 25% and 30% to between 833.9c and 867.2c. Normalised HEPS is expected to rise by 24%-29%.
The group will release its interim results on March 3.
By market close the share price was up 7.64% to R262.30.
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